Council moves to sell aged care home, double rate hike to avoid $57m budget black hole

The City of Glen Eira has moved to sell off the last council-run aged care home in Victoria and will seek a rare rate cap exemption to avert a cash crisis.

In a 6-1 vote on Tuesday night, councillors endorsed applying for Essential Services Commission approval to raise rates 5 per cent in the coming financial year – almost double the 2.75 per cent cap set by the state government in December.

On Wednesday afternoon, the council revealed it had also voted confidentially to consider transferring ownership of the Warrawee Community – a 90‑bed aged care facility in Bentleigh East – to a registered aged care provider.

Mayor Simone Zmood said the home was not closing, but a council statement said locals would now be asked about who should run it before a decision in June.

Glen Eira said the facility operated with a $5.5 million annual deficit, and that national aged care reforms in November had increased regulatory requirements further.

“Households are feeling the pressure of rising costs and so is local government,” Zmood said. “No decision has been made – but we must make a decision soon.”

The debate and vote to consider selling the Warrawee aged care centre was conducted behind closed doors as council officers deemed the item commercially sensitive.

Glen Eira officials have warned cash reserves were forecast to fall from $67.4 million to $10.9 million by 2034-35 as rising costs and debt repayments will outstrip revenue unless action is taken.

“At this level, we would not have enough short-term funds to meet day-to-day costs or maintain essential services and infrastructure,” a council report said.

The City of Glen Eira covers suburbs in Melbourne’s south-east including Caulfield, Bentleigh and Glen Huntly.

Deputy Mayor Li Zhang moved the motion for a 2.25 per cent rate cap variance and said council had already tried to reduce costs elsewhere, including by closing early learning centres and exiting in-home aged care.

“But there comes a point where you can’t keep cutting without starting to cut into the basics,” she said.

If Glen Eira’s higher rate cap request is approved by June and implemented later this year, the municipality would become the first metropolitan council to utilise an exemption.

Glen Eira has historically had some of the lowest rates in Melbourne, which became locked in when the Andrews government introduced the capping scheme in 2016.

The rate rise cap is linked to consumer price index (CPI) forecasts to stop excessive increases, but the Municipal Association of Victoria says this does not accurately reflect faster-rising council expenses from sectors such as construction.

Inflation also greatly exceeded forecasts after the pandemic hit, causing a $55 million impact on Glen Eira and opening up a “structural gap” in its finances.

During Tuesday night’s debate, councillors also blamed cost shifting from the state government and a budget blowout in the $75 million Carnegie swimming pool redevelopment for their parlous situation.

A rate rise of 5 per cent in the 2026-27 financial year would generate about $3 million in extra revenue annually, officers said.

It would equate to about $37 extra per year for the average rated property – although the most valuable properties could be charged hundreds of dollars more.

Councillor Sam Parasol voted against the extra rate hike, citing cost-of-living concerns.

“I feel the community is – as a whole – really suffering and hurting,” he said. “I think somehow we need to find other ways to raise our income.”

Seventeen Victorian municipalities have applied for higher rate caps since the system was introduced, but most were smaller rural councils tasked with maintaining vast swaths of infrastructure and services.

The City of Monash is the only metropolitan council to win a rate cap exemption so far, but ultimately did not utilise it in 2018-19.

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